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 Posting error.

 Trial balance errors – a balance is omitted, or incorrectly extracted, in preparing the trial

balance.

 Compensating errors – two equal and opposite errors leave the trial balance balancing.

Suspense Account - the suspense account records the difference, an entry to it is needed,

because the error affects the difference. However, there is no ledger entry for the other side of

the correction – the trial balance is simply amended.

1.5 Financial statements of a sole trader

The sole trader financial statements are the balance sheet, the income statement, statement of

change in owner's equity and the statement of cash flows.

Income statement

The income statement of a sole proprietorship will not report any salary expense for the sole

proprietor who works in the business. However, if the business is a regular corporation, the

income statement will report as salary expense the amount that the stockholder earned by

working in the business. Another difference involves income tax expense. The income statement

of a sole proprietorship will not report income tax expense

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